We had a strong (okay, really strong) hunch that the iPad was a contributing factor in Microsoft's waning Windows revenue in Q2, but there's nothing like a little confirmation from Redmond. During the earnings call, Microsoft CFO Peter Klein was asked if tablets were cannibalizing PCs, to which he responded:
That seems like an admission that people aren't buying Windows 7 tablets, but either way, it's now crystal clear that Microsoft suffered during the back-to-school and holiday season because consumers who may have previously picked up a Windows 7 Starter netbook went for a glossy new iPad (or maybe a Galaxy Tab in the later part of the quarter) or a more powerful ULV ultraportable. Obviously, the shift to tablets is to be expected, but the latter bit about ultraportables is quite telling as well -- it seems to further confirm that people are seeking more power than Intel's Atom, although we don't really see how increased ultraportable sales would be a "drag on the consumer side" of Microsoft's business considering ultraportables run Windows 7 Home Premium or Professional.I think that as Bill [Koefoed] talked a little bit in his comments about netbooks and how netbooks were, they hit their peak last year in Q2, and I think what we've seen is over the course of this year in the consumer space, some of that volume being replaced with newer devices like ultra-portables and tablets. And largely, these are second devices, not primary devices. And that's caused a little bit of a drag on the consumer side.
Sadly, Klein made no mention of Microsoft's future tablet plans, but stated that netbooks were past their prime. We're pretty sure that "next version of Windows" or whatever tablet OS Microsoft is planning couldn't come soon enough for everyone. Or hey, could we suggest reviving the Courier?